Company Overview: Bayou Group LLC The Bayou Group LLC (Bayou Group) was founded by Samuel Israel III along with two co-founders, James Marquez and Daniel Marino in 1996. It attracted many investors as there is high expectation on it produces high returns. Bayou was a service company that does trading and investing client’s fund to produce return. It raised an initial fund cost $300 million Israel and Marino made promise that the value of fund would be increase to $7.1 billion in ten years. However, in 1998 Bayou did not produce any profit but started occurred losses due to its application of strategic was not effective and efficiency. To solve this issue, Israel choose not to change strategic or close up some shop, he incorporated an audit firm to audit his company with fake documents in order to convince the investors. Soon he couldn’t
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Rationalization forms in multiple ways. For example, the organization is strong enough to absorb what he stole from organization. Rationalization makes them not feeling shameful of their wrongdoing and gives them a motivation to do so. This case happened when the employees felt that the company or organization owed them when they never get raises in their salary for few years. In common, they treat themselves as honest people who are trapped in a difficult circumstance and not as a criminal.
In the case of Bayou Hedge Fund fraud case, Israel and Marino had made promise to the investors who invested $300 million initial funds in Bayou Group to have a return of $7.1 billion. However, they were suffering from the stress given by the investors when the fund started experiencing losses.
Israel found the easiest way to solve the problem he encountered at that time compared to the alternation of their strategy or winding up the business. Hence, he decided to cheat by setting up a new corporation to audit the accounts of Bayou Group.
The Mechanism of Bayou Hedge Fund Fraud
Rationalization forms in multiple ways. For example, the organization is strong enough to absorb what he stole from organization. Rationalization makes them not feeling shameful of their wrongdoing and gives them a motivation to do so. This case happened when the employees felt that the company or organization owed them when they never get raises in their salary for few years. In common, they treat themselves as honest people who are trapped in a difficult circumstance and not as a criminal.
In the case of Bayou Hedge Fund fraud case, Israel and Marino had made promise to the investors who invested $300 million initial funds in Bayou Group to have a return of $7.1 billion. However, they were suffering from the stress given by the investors when the fund started experiencing losses.
Israel found the easiest way to solve the problem he encountered at that time compared to the alternation of their strategy or winding up the business. Hence, he decided to cheat by setting up a new corporation to audit the accounts of Bayou Group.
The Mechanism of Bayou Hedge Fund Fraud